After years of planning, saving, and sacrificing, you finally closed on your first home. However, the work doesn’t stop there. You still need to work on your financial planning and budgeting.
Start by getting out of debt and building an emergency savings fund. Then, you can focus on the perks of homeownership.
1. Know Your Budget
A financial budget is the best way to know what’s going on with your money. It will allow you to see where your money is actually going each month, and it will help you stick to the goals you have set for yourself.
You can use a spreadsheet, a budgeting app, or even just pen and paper to make your budget. Make sure to include all of your expenses and break them down into categories like bills, food, entertainment, and miscellaneous costs.
Make sure you’re living within your means, and that any additional income is going into savings or debt repayment. Saving is a crucial part of being a homeowner, and it will help you in the long run if there are any emergency expenses that come up.
2. Don’t Forget About Homeowners’ Insurance
While a down payment is typically the biggest expense new homeowners have to face, there are plenty of other costs associated with homeownership that should also be factored into a mortgage loan application. These expenses include homeowners’ insurance, HOA fees (if applicable), property taxes and home maintenance.
Homeowners’ insurance protects your investment in the event that a natural disaster or other catastrophe damages your house. In addition, it provides liability coverage in the event a person is injured while visiting your home.
If you’re in a flood zone or wildland-urban interface area, your homeowners’ policy may be more expensive and difficult to obtain. But don’t let these issues discourage you from purchasing a home. Instead, take steps to lower your premiums by raising your deductible or adding security features.
3. Make Sure You Have a Home Warranty
If you’re shopping for a home, have your real estate agent ask whether the property is covered by a warranty. If it is, you can try to negotiate a deal with the seller or see if they’ll add one to your purchase contract at closing.
Home warranties aren’t required by lenders like homeowners’ insurance is, but they can make a new homeowner’s life less stressful when something goes wrong with an appliance or home system. It’s important to understand the differences between a home warranty and homeowners’ insurance, though, to make sure you’re getting coverage you need. You may also be able to save money by using your home’s warranty as an emergency fund instead of depleting your savings or taking on debt. This could be the best way to ensure your financial stability in the long term. Things that get used over time will eventually need to be upgraded or fixed so having an appliance warranty can greatly reduce your repair costs.
4. Be Flexible With Your Budget
New homeowners should have a flexible budget to account for unexpected expenses. That means tracking spending on a regular basis, whether through an app, spreadsheet or old-fashioned pen and paper.
This way, when a new expense comes up, you’ll know if it’s something you can afford or not. It’s also important to have a savings goal to work towards. This could be anything from paying off debt to putting money aside for a dream vacation.
Another great money-saving tip for homeowners is to keep an eye out for sales at hardware and home goods stores. These types of retailers regularly drop the cost of perfectly good merchandise to clear out space and make room for new items. You can find amazing deals on everything from appliances to furniture and even “oops” paint.
5. Don’t Forget About Savings
If you’re planning on buying a home, it’s important to start saving. This will allow you to get the most out of your home purchase and protect yourself from unexpected expenses in the future.
Initially, it’s best to put money into an emergency fund that can cover three to six months of normal expenses. Once this is done, invest any additional funds that aren’t going toward specific near-term expenses. Over time, this capital will grow thanks to the power of compounding.
Remember that life circumstances may change your cash flow, so it’s a good idea to revisit spending and savings regularly. With a little practice, you can make sure that your finances are in order for 2024 and beyond. This includes making smart choices about your energy use.